Yes, ETFs Do Pay Dividends—And Some Can Deliver Growth Too

The short answer is yes: ETFs absolutely pay dividends. But here’s what makes this investment vehicle truly interesting—not all dividend-paying ETFs are created equal. While many investors assume that any fund focused on dividends must be geared toward retirees seeking steady income, the reality is more nuanced. Some dividend ETFs offer a compelling combination of current income and long-term growth potential, making them surprisingly suitable for younger investors who won’t need that income for years to come.

Why Vanguard Dividend Appreciation ETF Stands Out

The Vanguard Dividend Appreciation ETF (VIG) represents a different approach to dividend investing. Rather than chasing the highest current yields, this fund tracks an index of roughly 300 companies with a proven track record of consistently increasing their dividend payments year after year—or those expected to do so in the future. This distinction matters significantly because it opens the door to holding companies that traditional dividend funds typically exclude.

With an expense ratio of just 0.05%, VIG keeps costs low while pursuing a strategy that rewards companies committed to shareholder returns over the long haul. The fund isn’t targeting yesterday’s high-dividend payers; instead, it’s betting on businesses that are willing to raise payouts regularly, signaling confidence in their future earnings power.

Consider Broadcom (AVGO), which sits as the fund’s largest holding. At just 0.8% dividend yield, Broadcom wouldn’t qualify for most traditional dividend funds. Yet the semiconductor company has raised its dividend for 15 consecutive years—every single year since beginning payments in 2011—including a 10% increase in fiscal 2026. That’s the kind of consistent capital return that the Vanguard fund prizes.

Technology Holdings Make This Dividend ETF Different

What sets this ETF apart is its portfolio composition. Unlike older dividend funds weighted toward utilities and consumer staples, VIG’s largest sector allocation is technology—a reality that surprises many investors who still think of dividend funds as inherently stodgy.

Among the top holdings alongside Broadcom, you’ll find household names like Microsoft (MSFT), Apple (AAPL), and Mastercard (NYSE: MA). Each of these carries a current dividend yield below 1%, which would disqualify them from traditional high-yield dividend ETFs. Yet all three have demonstrated exceptional ability to grow their dividend payments consistently while expanding cash flow at impressive rates.

This tech-heavy positioning means you’re not stuck in yesterday’s industries when you own VIG. You gain exposure to innovation and growth while building a future income stream that should be substantially higher than today’s payout by the time you need it.

Building Income for Your Future While You Still Work

The genius of the dividend appreciation strategy becomes clear when you think about your timeline as a working-age investor. If you’re 20, 30, or 40 years from retirement, why prioritize maximum current yield? The Vanguard Dividend Appreciation ETF offers something more valuable: a portfolio of fast-growing businesses with an average annual earnings growth rate of 13%, paired with a growing income stream that compounds over time.

Imagine holding a position that delivers 0.8% in dividends today but increases that payout by double digits annually. In 15 years, that same 0.8% dividend could look substantially different—possibly 2% or higher—while the underlying stock value has appreciated. You get the best of both worlds: capital appreciation now and a meaningful income stream later.

This makes VIG a natural fit for investors who will eventually depend on their portfolios for income but remain years away from that need. The fund builds toward future income while you’re still earning a salary.

Understanding the Track Record: Real Numbers Tell the Story

The long-term case for dividend-focused investing gains credibility when you examine historical returns. Stock Advisor’s analysis team has tracked the performance of dividend and dividend-growth strategies over extended periods. For perspective, if an investor had followed Stock Advisor recommendations from December 2004 and invested $1,000 in Netflix at that time, they would have accumulated approximately $450,256 by early 2026. A similar investment in Nvidia recommended in April 2005 would have grown to roughly $1,171,666.

These aren’t typical dividend-fund returns—they represent a broader investment approach. Still, they illustrate the power of owning companies with strong fundamentals and pricing power. The Stock Advisor portfolio has delivered a 942% average return, substantially outpacing the S&P 500’s 196% return over comparable periods (as of February 1, 2026).

The point isn’t that VIG will match those extraordinary returns, but rather that owning appreciating dividend payers—especially tech companies—has historically rewarded patient investors far better than traditional high-yield dividend strategies.

The Bottom Line on Dividend-Paying ETFs for Growth Investors

Yes, ETFs do pay dividends, and the Vanguard Dividend Appreciation ETF demonstrates how dividend-paying funds can serve multiple purposes. If your priority is maximum current income, other options may suit you better. But if you’re building wealth over decades while positioning yourself to eventually live off investment returns, this dividend ETF warrants serious consideration.

The combination of a low 0.05% expense ratio, technology-forward holdings, consistent dividend growth, and 13% average earnings growth makes VIG a portfolio piece that bridges two typically separate investing objectives: near-term growth and long-term income stability. That’s a balance worth examining carefully, especially if you won’t need that dividend income for years to come.